There’s a storm brewing overseas. A half dozen or so smartphone manufacturers have started scheming on how to storm the U.S. market with their mobile devices. It’s a tough market here, what with Apple and Samsung currently gobbling up the lion’s share of smartphone sales and carriers dictating which phones will work with which customers. But it’s also incredibly lucrative, with over 150 million smartphone sales each year, many in the high-price, high-margin premium phone segment.
That’s the way Zhiqiang Xu, President of Huawei’s USA device division, sees it. The Chinese company is ranked number four in smartphone shipments worldwide as of late last year, according to IDC. Huawei has been successful with its high-end and mid-range line of smartphones, and now it’s hoping to bring some of that success stateside.
It’s not going to be easy, but Mr. Xu has high hopes. He’s confident he has a solid plan and he isn’t worried about the carriers or the competition—in fact, he’s optimistic Huawei’s product is enough to eventually make it number three in the U.S.
Greenbot: There’s been lots of talk about Huawei’s plan to take over the world. When is this actually happening? We haven’t seen too much Huawei product in the U.S. just yet.
Xu: Worldwide, we do a lot of marketing campaigns to improve the Huawei brand and improve loyalty, but the U.S. is definitely a special market in that it’s dominated by the carrier. It’s the highest carrier market—only Japan is comparable to that—whereas the rest of the world is not as high as the U.S. We made fundamental changes last year—I wanted to change the Huawei model and catch up with the rest of the world. But this change requires a huge amount of work to make it happen. Last year, we spent a lot of time preparing for [the U.S.], and this year you’re definitely going to see some real Huawei product launch in the U.S. market—not just the smartwatch you saw in Barcelona. You can expect us to launch our flagship phones here in the states.
Greenbot: Are you planning to launch with carriers or sell the phones exclusively online?
Xu: Both ways. We’re going to merge the U.S. portfolio with our global portfolio. That means, in the next several years, you’re going to see us launch our flagship phones like the M7 and P7 in other regions, and here in the U.S. as well. We’re investing hugely to make this happen.
[Ed. note: Huawei recently announced the P8 & P8max, though there’s no word on when either will hit the U.S.]
Greenbot: How is this new strategy of coming to the U.S. different than what Huawei’s done before?
Xu: Before, we were just doing ODM business. The carrier gave you a specification requirement and we made the phone for them. But it wasn’t consumer oriented or consumer experience oriented.
If you want something to be consumer oriented, you have to rework the whole procedure. You have to do your own market research to position your product and then offer it to the carrier as something that could help them reach their business target.
Greenbot: Can you touch upon some of the challenges that Huawei’s faced coming into the U.S. market?
Xu: The U.S. is the most challenging market in the world, but I’m excited for this challenge. If you look at the whole picture, you’ll find that everybody is here. The phone brands that have disappeared in other regions are here in the states—the Japanese, Korean, Chinese, and Taiwanese brands—everyone is here. It’s the second largest market in the world, after China, and it’s the one country where over 80 percent of phones are premium, so there’s a huge opportunity here.
Greenbot: Which carriers are you working with?
Xu: Currently, we’re working with AT&T and Sprint. We’re working with Verizon as well, but not with phones. T-Mobile, we work with a lot, too. These four carriers are going to be our main focus.
Greenbot: Is there a time frame we can expect this all to happen?
Xu: With AT&T, there’s already product we’re selling there. At Sprint, we’re looking at October. As for e-commerce, you can expect several products in April, July, and August.
Greenbot: What’s one of the main differences of Huawei’s business overseas in China and here in the U.S.?
Xu: Almost 50 percent of the Chinese market is an open market, so you can launch your product freely with the carrier or e-commerce. You can do whatever you want just as long as you follow the government regulations. In the states, the carriers own 90 percent of the marketshare, and only about 10 percent are left for open markets.
But it’s changing. We see with T-Mobile, for instance, with its Uncarrier plan, as well as Sprint, AT&T, and Verizon going in the direction of reducing the subsidy for the phone. If the carriers keep going that way, these markets are going to be more and more open because people won’t have to rely as much on subsidies.
Greenbot: Does that make you more optimistic about bringing Huawei to the U.S.?
Xu: We see the trend going that way and I think it’s a good way to go; the consumer is paying for everything, anyway, no matter the subsidy. But with no subsidy, it’s more transparent. You can decide whether you pay more money on the phone or the services, or pay earlier or later on.
Also, these big changes will open the portfolio for vendors. After subsidies, any flagship phones come down to $199 anyway, so immediately the pricing drops from $500+ to $200. If you take a survey of the U.S. phones portfolio, you’ll see the price range in the middle is missing. That particular price range is a huge opportunity.
Greenbot: What is the overall strategy for bringing Huawei product into the U.S.?
Xu: Our strategy is to provide the U.S. customer with premium phones and a very good user experience. We are 100 percent sure of our quality, too, so we’re going to provide U.S. customers with a special warranty: two years to give you the peace of mind to choose your phone. People like fantastic products, and if the price is also fantastic they’re going to love it more.
Greenbot: How do you feel about the proliferation of Chinese companies entering the U.S. market? Are you worried about the competition?
Xu: This is a huge market. The people coming here can have a little piece of the pie—the market is big enough for that. What matters is how big the share you’re going to have.
One of our competitive edges is technology. We are experts on this and we see every evolution of the technology as a chance to increase our marketshare.
Second, our product is marketed worldwide, so we have a presence in over 170 countries. We offer attractive products with attractive prices.
Third, you can never do this business alone, so you need a partner. We’ve partnered with Qualcomm and Google in the states to build a friendly business ecosystem.
Lastly, we have enough resources to put this strategy into execution. With these four elements…we’re going to be able to change the market. My target is very clear: in my five year tenure here in the States, I’m going to lead Huawei to be a top three smartphone player in the states. That is my target here.
Greenbot: Is that top three Android manufacturer or top three overall?
Xu: All of them [including Apple’s iPhone]. This year—2015—is going to be critical for Huawei’s business in the states.
Greenbot: What if you can only get as high as number five? Do you see yourself changing your strategy?
Xu: Yes. Definitely, no matter which way you go, or which way you’re marketing, you have to show your customers your products, your services, and how good it is. Our confidence comes from our product. Then, of course, we’re going to do the marketing campaigns, and those sort of things—I hope smartly. In the first several years, maybe during this test time period, we might make some mistakes. But if we keep making good products, I think we’ll improve year by year to get there.